New changes to sick pay regulations will put some West Midlands businesses under 'huge' financial pressure, says one of the region's leading employment lawyers.
Employment expert Sally Morris says the new rules will leave firms facing hefty National Insurance contributions – adding to the cash burden for many hard-pressed smaller firms.
Ms Morris, partner and head of employment at Midland law firm mfg Solicitors, is urging business owners to seek advice on the little-publicised sick pay shake-up by HM Revenue and Customs and the Department for Work and Pensions.
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"The new sick pay rules were introduced on 6 April and abolished the need for employers to keep records of statutory sick pay for their staff, while handing them the freedom to use a system that suits them," said Ms Morris.
"It is a welcome move but the new rules also brought down the curtain on an employer's right to recover statutory sick pay from HMRC through their monthly National Insurance contributions. They can only be reimbursed for absences up to 5 April 2014 as long as the claim is made by the end of the 2015/16 tax year.
"The money the Government will save is being used to prop up a new Health and Work Service which will create a referral service for any employee off sick for more than four weeks.
"But that won’t be launched until 2015. So for the current tax year, employers will have to cover the £86.70 weekly sick pay themselves, as well as the cost of a replacement worker. That is a frightening prospect for many small firms.
"Supposedly this plan is meant to be an incentive for businesses to get sick employees back to work, with annual savings of £50m. But it is negative for smaller firms and many are left in a state of limbo with increased costs.
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"Take, for example, a small retailer in Birmingham where the owner employs one other person and that person goes on long term sick leave.
"The employer will be paying £86.70 in weekly contributions, unable to claim that cost back, and then either has to struggle on alone or bring in a temporary replacement.
"That's is something they simply don’t have the budget for," added Ms Morris.